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Akamai, American International , Walmart, Amazon and Kroger as Zacks Bull and Bear of the Day

Zacks Equity Research
Best Buy (BBY) has an impressive earnings surprise history and currently possesses the right combination of the two key ingredients for a likely beat in its next quarterly report.

For Immediate Release         

Chicago, IL – May 22, 2018 – Zacks Equity Research highlights Akamai Technologies AKAM as the Bull of the Day and American International Group AIG as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Walmart WMT, Amazon AMZN and Kroger KR.

Here is a synopsis of all five stocks:

Bull of the Day:                                              

Akamai Technologiesis one of those companies that’s not necessarily a household name, but that virtually everyone interacts with on a daily basis without even being aware of it.

Akamai’s “Intelligent Platform” is a distributed cloud computing network of over 240,000 servers worldwide which gathers real-time data on net traffic and congestion and uses complex proprietary algorithms to ensure the most efficient content delivery possible.   An estimated 15-30% of all web traffic is routed through Akamai’s network.

Akamai’s customers take advantage of this vast network to have content delivered from server locations that are geographically closet to the end user, ensuring the best performance and user experience possible.  Akamai also provides advanced cloud security services.

Akamai has been steadily growing revenue and earnings and has beat the Zacks Consensus Earnings Estimate in each of the past 4 quarters, including a strong Q1 one report in which management raised guidance for 2018.  

Q1 revenues were $669M, with $353M coming from the Web Division and $316M from the Media and Carrier division, increases of 16% and 6% respectively, over the year-ago period.  Net earnings were $0.79/share beating estimates of $0.70 by 13%.

The real bonus for investors was that the company raised guidance for both Q2 and FY2018.  

CEO Dr. Tom Leighton stated “We are pleased with the results of our first quarter performance, which featured continued outstanding growth in our security business, substantial improvement I our media business, marginal expansion and accelerated revenue growth overall.”


Akamai is clearly firing on all cylinders. Revenues next quarter are expected to be in the range of $658M - $670M and earning between $0.79/share and $0.83/share.  Full year earnings guidance is now $3.15/share to $3.25/share, up from previous guidance of $2.90 - $3.01/share.

Akamai shares are up 17% in 2018, handily beating the Internet Services industry as a whole, which has declined 5%.

Bear of the Day:

After nearly collapsing during the financial crisis in 2008, American International Group was once of the most high-profile beneficiaries of U.S. government intervention in the Troubled Asset Relief Program, commonly referred to as TARP.

Having decided that the failure of AIG, with its large and diverse basket of assets and liabilities would cause catastrophic damage to the U.S. financial system and economy, the U.S. became AIG’s largest shareholder, at one point owning 61% of the company’s shares.  The program mandated significant changes to AIG’s structure, including a new corporate governance structure, and a reduction in exposure to risky derivative securities.

By 2012, the U.S. Treasury and federal Reserve had not only recouped all of the $182 billion they had staked to the bailout, but after selling all of its remaining shares, actually posted a profit of nearly $23 billion on the transaction.

Thanks to the austerity measures levied on the company while under government ownership, AIG has never returned to the high-flying status it enjoyed before the crisis. The size of the company was cut by nearly 50% in terms of assets and its exposure to derivatives was lowered by over 90%.

Although a much safer and more stable company, the huge insurer is a mere shadow if its former self in terms of profits.  Even in an environment of low interest rates, a rising stock market and softening regulations that should benefit financial companies, AIG has underperformed, with shares up just 34% in the past 5 years versus an average of better than 50% for the insurance industry. 2018 has been even worse, with the stock down 7% YTD.

3 Retail Stocks to Buy Ahead of Quarterly Earnings

Is Walmart (WMT) Still Cheap Right Now?

Shares of Walmart opened higher on Monday just a few trading days after the company reported solid first-quarter earnings results. With that said, Walmart’s stock price had sunk over the last few months, which means now might be a great time to consider buying the retail giant at a relatively cheap price.

Walmart’s overall revenues climbed roughly 4.4% from the year-ago period to hit $122.7 billion in the first quarter, with comp sales up 2.1%. Meanwhile, the company’s adjusted earnings surged by 14% to reach $1.14 per share, which also topped the Zacks Consensus Estimate of $1.12 per share.

Investors should also have been pleased to see that Walmart’s U.S. e-commerce sales popped by 33%, despite increased competition from Amazon and other online sellers. Now, let’s take a look at Walmart’s price movement before we dive into why the company’s current valuation looks rather enticing.

Recent Price Movement

Walmart stock was up roughly 8% over the last year before Monday’s gains. However, shares of Walmart had sunk 9.8% during the last 12 weeks and 4.8% over the last four weeks as investors reacted negatively to the company’s slower fourth-quarter e-commerce growth.   

Furthermore, shares of Walmart sat at their 52-week high of $109 per share in late January. Walmart stock opened Monday at $84.14 per share, which means shares of Walmart are much cheaper than they were to start the year just based on price alone.

Still, investors need to know a little more before they can say that Walmart stock is currently offering a ton of value.

Valuation

Coming into Monday, Walmart stock was trading at 16.9X forward 12-months earnings estimates. Walmart stock has traded as high as 23.8X over the past year, with its median resting at 17.9X. The company is also currently trading just slightly above its year-long low of 16.4X, which it rested at briefly in early July of last year.

Walmart stock is also trading directly in line with the S&P 500’s average of 16.9X. Furthermore, the company compares favorably to the “Retail – Supermarkets” industry’s current average forward P/E ratio of 16.3. This industry includes the likes of Kroger other large U.S. grocery chains.

Based on the last year alone, investors should be able to say with some conviction that Walmart stock is rather attractive at its current valuation, and pretty cheap compared to where it has traded recently.

Growth Outlook

Lastly, it is worth considering Walmart’s current growth prospects. The company is projected to see its second-quarter earnings climb by 12.9% to touch $1.22 per share, based on our current Zacks Consensus Estimates. For the full-year, Walmart is expected to hit $4.86 per share, which would mark a nearly 10% surge from a year ago.

Meanwhile, Walmart’s revenues are only projected to pop by 1.8% in Q2, while full-year revenues are projected to climb by 2.08% to reach $510.74 billion. Investors might be a bit less pleased to see these top-line projections, but it is worth considering just how hard it is to post massive top-line growth when the company is expected to pull in over $510 billion.

Our 2% full-year growth estimate would mean Walmart expanded its top line by $10 billion.

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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Akamai Technologies, Inc. (AKAM) : Free Stock Analysis Report
 
American International Group, Inc. (AIG) : Free Stock Analysis Report
 
Walmart Inc. (WMT) : Free Stock Analysis Report
 
The Kroger Co. (KR) : Free Stock Analysis Report
 
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